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October 23, 2013

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Health insurer Anthem aims to pull a small profit this year from the Affordable Care Act's public insurance exchanges, and its CEO said Wednesday he's "really glad" to be serving nearly 1 million people in this still-developing market.

The Blue Cross-Blue Shield carrier's message arrived about a week after rival UnitedHealth Group said it was bleeding money on the exchanges and slashing its presence down to a handful of states. But Anthem delivered its optimism with a big caveat.

CEO Joseph Swedish said the state-based exchange business still needs to be stabilized, and they are talking with government officials about ways to accomplish that.

"We believe we are well-positioned for continued growth in exchange (enrollment) as this market stabilizes," Swedish told analysts during a conference call to discuss the insurer's first quarter.

Insurers have faced several challenges since the exchanges opened for enrollment in fall 2013 and gave them a new market in which people could buy coverage with help from government tax credits. Their initial wave of customers generated higher-than-expected claims in many markets.

Insurers also have struggled to attract younger consumers who don't use as much health care and could balance those more expensive patients.

Anthem and other insurers have said, in particular, that the government needs to tighten loopholes that let customers buy coverage outside annual enrollment windows. Anthem also wants more flexibility in the type of coverage it can sell in this market.

The Indianapolis-based insurer essentially broke even on its exchange business last year. Company leaders said Wednesday that they hope to eventually make a profit of 3 percent to 5 percent off the business, but that likely won't happen until after 2017.

UnitedHealth, meanwhile, said last week that it lost $475 million on the exchanges last year and expects to lose $650 million this year. The insurer started slowly by selling coverage on only four exchanges for 2014, but its participation ballooned to nearly three dozen states this year.

Anthem has taken a more measured approach. It sells coverage in 14 states, and has no plans yet to expand. Anthem leaders told analysts they were focused on cutting expenses and improving the profitability of the business they have.

Even so, the insurer said its exchange enrollment has grown more than expected and reached 975,000 by the end of this year's first quarter, a 23 percent increase from the end of 2015.

Chief Financial Officer Wayne DeVeydt said Anthem gained customers in states where not-for-profit health insurance cooperatives became insolvent and stopped offering coverage. He said Anthem picked up business even though the cost of its coverage was, in many case, substantially higher than other carriers. Company officials think customers were drawn to its coverage by the company's well-known brand and reputation.

"There appears to be a little bit of a flight to safety, if you will," DeVeydt said.

Anthem officials said they'll gain additional business on the exchanges once they complete a $48 billion purchase of rival insurer Cigna Corp., a deal they expect to close in the second half of this year.

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